with Morten W. Jeppesen, Managing Director, Maersk Oil Norway
To what extent has Johan Sverdrup opened doors for Maersk Oil to develop its E&P portfolio in Norway?
Maersk Oil has decades of experience in Denmark, and entered the UK about ten years ago. By comparison it is a relative newcomer to Norway. So finding Avaldnses, which became part of Johan Sverdrup, was a nice way to establish Maersk Oil in Norway. However, while its magnitude was largely unexpected, we were expecting a discovery. This demonstrates that Maersk Oil knew where to look for hydrocarbons having identified the right subsurface conditions. This was a major achievement for Maersk Oil Norway.
I would add that our focus in the Norwegian North Sea has drawn upon experience from the UK and Denmark. Maersk Oil’s discoveries in Norway have put the company on the map, transformed its long-term presence here, and confirmed that its strategic move into Norway was a good investment.
Our long-term commitment for Johan Sverdrup is important for the way we relate to all our stakeholders, from the authorities to joint venture partners, and from the supply industry to current and future employees. Johan Sverdrup is a really attractive project which makes attracting funds and good employees easier, as well as maintaining motivation among existing staff. The type of people that work for successful companies like us are strongly motivated by having fun and excitement and the sense of being able to make a real difference.
What do you feel Maersk Oil brings to the table in support of the development of Johan Sverdrup?
Maersk Oil has a very long track record as an operator of assets throughout the value chain in the upstream industry. For example, we developed the giant Al Shaheen field in Qatar, one of the most complex offshore projects in the region. Other companies believed Al Shaheen was impossible to develop commercially, but since first oil in 1992, Al Shaheen has delivered over 1 billion barrels of oil. We have real hands-on experience as an operator with developments in Denmark such as the Halfdan field, which was discovered in 1999 and was brought on to production just a year later. Maersk Oil can really contribute in the area of very large scale development projects with a strong focus on delivering on time and on budget. Within the Johan Sverdrup partnerships, we are the most experienced company in large scale development projects, bar Statoil. I feel that with the company’s experience and track record, Maersk Oil is uniquely positioned to bring an outsider’s perspective into Norway for this development.
Service and technology providers talk about how Norwegian E&P companies are very receptive to employing new technologies. How do Danish companies compare?
I would not rank each country. I would say that Maersk Oil has developed a lot of know-how and technology suited to meet the challenges we have had in Denmark. I would mention our long horizontal wells and innovative completion and stimulation solutions to develop highly complex reservoirs – technologies that we have transferred to other countries. I think the industry as a whole is innovative, especially when it needs to respond to complex geology and commercial realities.
Maersk Oil has 19 licenses in the North and Norwegian Seas, you were awarded seven new licenses from the 2011 Awards in Predefining Areas (APA) round. How do you benefit from the experience that you have in the UK and Denmark in terms of bringing this experience across to Norway?
We work very closely with our colleagues in Denamrk and the UK. We share common databases across the North Sea. We can take a more integrated look at opportunities in the North Sea. As a company with a presence worldwide we can draw upon a very large pool of expertise. We always tap into the collective knowledge base of a global Maersk Oil team through our exploration processes, which is a real strength for us.
With all this rush to go to the Barents Sea, there is the risk factor that the more mature assets in Norway will be overlooked by companies. What is your perspective on these two provinces as offering opportunities for E&P companies?
We have seen some spectacular discoveries recently in mature provinces. Whether or not there will be another Johan Sverdrup-sized discovery, I am confident that there is significant remaining potential in the North Sea. Compared to the Barents Sea, discoveries do not have to be as big in mature areas to be of commercial interest, so it is still an exciting proposition to work in both the North and Norwegian Seas, as reflected in our portfolio. Mature producing fields are in the relatively few hands of majors and supermajors in Norway. I do not see Maersk Oil playing a key role in mature fields here, but Maersk Oil has a strong track record in field revitalisation, mature field operations and can make a difference in these areas if the right opportunity arises. However, at the moment we are focusing on exploration growth in Norway.
Drilling cost inflation was highlighted as a major problem by Minister Ola Borten Moe. How does that influence your strategy?
Maersk Oil works with a global exploration portfolio. Whatever we do has to stack up against opportunities we have in other parts of the world. This means if the commercial realities are better than Norway’s in other parts of the world, that’s where the drilling will take place. This is how the industry operates. So, there is clearly a danger that the hugely successful revitalisation of the industry that we have seen over the last ten years in Norway will stagnate if operations become overpriced.
Maersk Oil’s first operated well in Norway was the T-Rex, which was an important safety step for the company. What are some of the lessons that you have managed to take away from this and what do you hope to apply to the Albert prospect?
The T-Rex well was drilled without any incidents despite extremely bad weather conditions and subsequently prolonged activity. T-Rex demonstrated that Maersk Oil can be a prudent and safe operator in terms of its systems and personnel under some very harsh conditions, and we have learned to never underestimate the weather.
We brought some very experienced drilling people from Maersk Oil abroad into Norway to establish operations here as part of our plan to build a sustainable, long-term drilling operation and organisation. We are pleased with the operational achievement so far. As an operator, you have different interactions with the authorities, particularly on safety and I think we worked very well with the Petroleum Safety Authority during the planning and execution of T-Rex.
We see pipeline infrastructure extending up to mid-Norway. Do you have any plans for infrastructure investments in Norway?
Maersk Oil is already a partner in the Norwegian Sea Gas Infrastructure (NSGI) project, which is of great interest to us in relation to our Norwegian Sea portfolio. I anticipate that NSGI will have a big impact on this region.
Given the excitement about the Barents Sea, and with your specialty being in the south and central parts of Norway, do you see yourself ever going to the Barents Sea?
We are following what is going on in the Barents Sea closely and it is part of our thinking for Norway. As a relative newcomer with a small portfolio, it makes sense to focus on more mature areas. As our portfolio grows, we will start to look at new areas with higher economic thresholds. I think the diversity of the portfolio should be related to its size, – balance is important. So, yes, we will be looking at the Barents Sea as a new growth area for Maersk Oil Norway at some point.
If we were to come back in five years, what type of impact would you like Maersk Oil to have on the NCS in terms of your portfolio?
In five years, I expect predrilling of development wells will have started Johan Sverdrup and the offshore facilities will be getting ready for installation. The Johan Sverdrup partnerships expect first oil by the end of 2018 and Maersk Oil will work hard to get its visible fingerprint on the development. We will continue to participate in licensing rounds and consider opportunities on the exploration front. We plan to drill one operated exploration well per year. Given the time it takes to get from discovery to production, in five years, we might even be close to sanctioning a Maersk Oil-operated project. Our ambition is to have operated production in Norway but we also realise that exploration is a long-term strategy.
You have also worked in Angola. What do you see are the key differences between Angola and Norway?
There are no countries in the world at the moment that can beat Norway in terms of delivering discoveries. Norway’s regulatory regime has been stable for years and encourages exploration. It’s very easy to know where you stand in Norway in terms of your fiscal and regulatory situation. Angola, with its turbulent history, is still learning how to best handle and oversee the many companies that are working in the country to develop its industries and infrastructure. Both countries of course have great potential – which is why we are there. In Angola in particular, the buzz at the moment is the pre-salt plays that mirror the prolific Brazilian pre-salt regions containing billions of barrels of oil. What both Angola and Norway do have in common is an extremely tight rig market –understandable given the recent exploration success in both countries.
Is there anything else you would like to tell our readers about Maersk Oil in Norway?
Johan Sverdrup has really established Maersk Oil as a long-term company in Norway, and this project is very important for us. Similarly, Maersk Oil wants to continue to grow its presence in Norway. We will continue to be active and to grow both our portfolio and organisation in Norway at a rapid pace. We feel that we have achieved something special with Johan Sverdrup and we want to build on that.